(Exact name of registrant as specified in its charter)

Delaware 1-7832 75-1729843

On March 31, 2005, the Compensation Committee (the "Committee") of the Board of Directors of the Registrant approved performance goals and related bonus payments applicable to the Registrant's 2006 fiscal year under the Registrant's Senior Management Annual Bonus Plan, as amended April 5, 2002 (the "Plan"), incorporated herein by reference to Appendix B, page B-1, of the Company's Proxy Statement for the fiscal year ended March 2, 2002. Performance goals set by the Committee are based on the Registrant's consolidated pretax profit, which includes operating income from all domestic and international operations (i.e., United States, Canada, Puerto Rico, Mexico and Great Britain for Pier 1 Imports, Inc. and Pier 1 Kids, Inc.) and does not include unusual or non-recurring charges. For fiscal year 2006, the participants in the Plan are the Registrant's CEO and seven Executive Vice Presidents. Participants are entitled to bonuses under the Plan upon the Registrant attaining a minimum of 80% of its planned pretax profit. At 80% of planned pretax profit, the Plan provides for a bonus of 10% of the CEO's base salary and 7.5% of each Executive Vice President's base salary. Bonuses paid under the Plan increase incrementally to the extent that the Registrant's actual pretax profit exceeds 80% of planned pretax profit for fiscal year 2006, up to a maximum bonus amount in any year to any individual under the Plan of $3,000,000, which for fiscal year 2006 for the CEO would require pretax profits to exceed planned pretax profits by 170%.